Prediction Market Compliance Tightens as Polymarket Starts Blocking VPNs and Kalshi Hires an FBI Analyst
Polymarket is blocking VPNs and rolling out KYC. Kalshi just hired an FBI analyst. Both moves are compliance under pressure.
Two minor prediction market stories landed last week that, taken individually, would each probably be worth a paragraph or two. Reports dropped that Polymarket has begun actively blocking IP addresses associated with VPN services, requesting identity verification from users with high trading volumes, and warning that VPN use can now trigger account suspension and fund freezes. In the recent frenzy of prediction market news, it’s something, but not earth-shattering.
It was also reported that Kalshi has hired former FBI white-collar crime analyst Tyler Neff to lead its market surveillance team, who will report to the head of enforcement and legal counsel, Robert DeNault. Once again, it’s certainly not nothing, but it’s not a head-turner of a news story, either.
Read together, the two stories begin to piece together an industry-wide compliance buildout in prediction markets, happening in real time. Both companies are racing to install the kind of surveillance, identity verification, and enforcement infrastructure that traditional financial exchanges have spent decades developing. The trigger is the regulatory and political pressure of the past few months, and the pace of the buildout suggests both companies have concluded that the libertarian-information-market era of prediction markets is ending, whether they like it or not.
What Polymarket Is Doing Regarding International Geocompliance
Polymarket has begun blocking known VPN IP ranges outright. Users with unusually large positions or rapid high-value cycling now receive automatic requests for identity verification. The company is also offering perks to users who voluntarily submit Know Your Customer documentation. The international platform, Polymarket.com, was historically designed to require none of this. The original product offered fully pseudonymous blockchain-based trading with no identity checks, no geofencing beyond a US block tied to the company’s 2022 CFTC settlement, and a deliberate emphasis on permissionless access.
The new posture is a meaningful retreat from that design. Polymarket is currently blocked in 33 countries and regions, and the VPN crackdown is intended to make those blocks enforceable rather than nominal. The House Oversight Committee has a June 5 deadline for Polymarket to provide documentation on its KYC procedures, geoblocking controls, and systems for identifying suspicious trading. Whether the timing of the VPN announcement is coincidental or preemptive, it falls squarely within the Congressional reporting window.
The structural question this raises is the one we covered when Shayne Coplan defended insider trading at Harvard. The international Polymarket and the US-licensed Polymarket were operating on different philosophies. The international one tolerated, and in Coplan’s framing actively benefited from, insider trading as a market-validation mechanism. The US one operates under CFTC market-integrity rules that treat insider trading as enforcement-worthy conduct. The VPN crackdown is the operational acknowledgment that the two philosophies cannot coexist indefinitely. Polymarket is bringing the international platform’s compliance posture closer to the US platform, not because the company decided the philosophy was wrong, but because the cost of maintaining the distinction has become unsustainable.
Why the CFTC’s Google Engineer Case Mattered
The trigger for the VPN announcement appears to have been the CFTC’s charges against Google software engineer Michele Spagnuolo on May 27. The agency alleged that Spagnuolo, a Swiss resident, used nonpublic information about Google’s Year in Search list to place trades on Polymarket.com, generating roughly $1.2 million in profits. The CFTC’s jurisdictional reach was the notable part. The agency charged conduct on the offshore platform, by a foreign national, on contracts related to a private company’s marketing list. The only clear US hook was that Google is an American company.
That case sent a clear signal. The CFTC is not going to respect the boundary between the international Polymarket and the US one. If the agency is willing to bring insider trading charges against trades on Polymarket.com, then every aspect of the international platform’s compliance posture is now within US enforcement reach. The reasonable strategic response is to bring the international platform’s controls up to US-style compliance standards before the agency forces the issue more directly. Three days after the Spagnuolo charges, Polymarket started blocking VPNs.
What Kalshi’s Compliance Buildout Represents
Kalshi’s compliance buildout is happening on a different cadence and from a different starting point. The company was designed from inception as a CFTC-regulated derivatives exchange. Its compliance posture has always been closer to a traditional financial venue than to a permissionless information market. However, the volume of suspicious activity it has been investigating has grown substantially. Kalshi has flagged more than 400 suspicious trades since the start of 2026, more than double the number from all of 2025.
The Neff hire is the response to that volume. Neff spent seven years as an intelligence analyst on a white-collar crime squad at the FBI’s New York field office, followed by stints at the New York Stock Exchange, Wedbush Securities, and Canaccord Genuity. The profile is recognizably that of an exchange surveillance analyst, someone whose job is to identify patterns in trading data that suggest market manipulation, insider activity, or coordinated abuse. Kalshi has also signaled its intent to publicize disciplinary actions against rule-breakers, a deliberate practice borrowed from traditional exchanges, where enforcement serves both punitive and deterrent functions.
The hire signals that Kalshi expects the surveillance burden to keep growing, and just about everything the industry has seen suggests they are correct. Hiring a senior FBI-trained analyst is the kind of investment a company makes when it anticipates regulatory scrutiny that requires it to demonstrate proactive monitoring rather than reactive cleanup. The company is not waiting to be told what compliance has to look like.
The Industry Is Professionalizing Under Pressure
What both stories describe, in their different ways, is the prediction markets industry installing the compliance infrastructure of a traditional financial exchange while the regulatory and political pressure builds around it. The Senate’s “No Sure Bets” hearing in May. The CFTC’s lawsuits against Minnesota, Connecticut, Illinois, and Rhode Island. The American Gaming Association’s $1 billion lost-revenue tracker. The fact that 41 state attorneys general are writing to the CFTC. The House Oversight Committee has reporting deadlines for both companies. None of these pressures existed in their current form six months ago. The compliance heat has ticked up against prediction market platforms, and they are responding.
The response has been to professionalize as quickly as possible. Identity verification systems, VPN enforcement, FBI-trained surveillance analysts, public disciplinary actions, suspicious-activity-report backlogs cleared, and market integrity rules published in March covering both international and US operations. The libertarian-information-market vocabulary that prediction market operators used to defend themselves in 2024 is still in circulation, but the operational reality on the largest platforms now looks much closer to that of a traditional exchange than to a permissionless protocol.
The bet both companies are making is that the regulators, lawmakers, and state attorneys general pressuring them right now will accept a professionalized industry more readily than they will accept the original design. Whether that bet holds depends on what the next round of enforcement looks like. The CFTC has been suing states to defend prediction market jurisdiction. It has also been charging individual traders for insider activity on the very platforms it is defending. Both things can be true at once, but they describe an industry that is being protected and policed simultaneously, and the policing is what is driving the current compliance buildout.
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